Argentina Suspends Debt Payments to World Bank - 2002-11-16

Argentina's economy minister says his country is not in default, even though it suspended some $800 million in payments due Thursday to the World Bank. The official also said Friday the action does not affect the government's ongoing debt rescheduling negotiations with the International Monetary Fund.

Economy Minister Roberto Lavagna says Argentina cannot afford to continue drawing down its international reserves to pay off debts to multilateral lending institutions. But he told reporters Friday this does not mean Argentina is in default.

He spoke one day after Argentina failed to pay the $805 million due on Thursday to the World Bank, making only a $79 million interest payment.

Mr. Lavagna said the decision reflects what he called "Argentina's reality" in which it owes $9 billion between now and May, an amount equivalent to all its reserves.

The Economy Minister was in Washington earlier this week continuing the prolonged negotiations with the IMF to restablish the country's suspended credit line. Mr. Lavagna returned home without an agreement, leading one Argentine official to denounce what he called the IMF's "savage" policies.

Broken promises to cut spending led the IMF to cut off aid to Argentina in December. The Fund continues to press the country to make more structural economic reforms, but in a communique said the talks are progressing.